Real estate investors now need 30% deposits in ASB

ASB has raised the deposit investors would need to obtain a home loan to 30 percent.

The move comes a day after the Reserve Bank said it was considering the reintroduction of loan-to-value restrictions in March 2021 to curb rising home price inflation.

ASB CEO Vittoria Shortt said a huge surge in property demand from investors threatened to push the nation’s home prices down a “potentially unsustainable path.”

She said: “ASB believes that a balanced and sustainable housing market is best for all New Zealanders.”

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Shortt said: “While we appreciate that the RBNZ took the time to consult, it is about helping Kiwis build their financial futures during exceptionally challenging times, so we are choosing to take this step now.”

He said the loan market has improved since New Zealand entered its first lockdown.

“Covid-19 has not impacted the real estate market as anticipated and ASB is now witnessing rapid growth in loan volumes,” he said.

“The number of applications we are receiving is at an all-time high, 70% more than this time last year, and while the proportion of first-home loans has increased, we have seen a rapid increase since Covid-19 in investor loans.

“If this surge in investor demand continues, it could lead the country down a potentially unsustainable path,” he said.

However, first-time home buyers wouldn’t have to make such large deposits to qualify for ASB home loans.

“Our focus at ASB is to work with the Government to provide opportunities for first-time home buyers to climb the property ladder,” said Shortt.

“For us, it’s about being a prudent and responsible lender. We all have to do our part and we are sure that Kiwis looking to buy their first home will appreciate this move, ”he said.

The Reserve Bank would be “breaking a commitment” if it restored loan-to-value controls on home loans in March, as the central bank said it could do on Wednesday, Westpac economist Dominick Stephens said.

The Reserve Bank said it would consult on the reintroduction of loan-to-value (LVR) restrictions on “subprime loans” as of March 1.

The central bank’s statement came hours before the Reserve Bank’s scheduled monetary policy statement on Wednesday afternoon.

With property prices rising rapidly, some have tried to find groups of buyers to blame.

Earlier this month, New Zealand Real Estate Investor Federation President Sharon Cullwick told Radio NZ this week that if a first-time home buyer who lives in a flat with others moves to buy a home, co-workers remaining floor plans would still need a rental property.

As a result, the home would occupy two houses instead of one.

That drew strong pushback from commenters.

Prime Minister Jacinda Ardern said this week that the returning New Zealanders, who fled from Covid hotspots around the world, were partly responsible for the price spike.

David Law, author of a report called Misdirection about housing affordability is futile, published by the economic thinktank of the New Zealand Initiative.

“Supply constraints are a big factor, but people coming back to New Zealand is an exaggerated problem at the moment,” Law said.

In the five months from April to August, net migration was just 1,700, he said, five times less than in the same five-month period last year.

“On the other hand, the Covid-19 restrictions have also reduced the housing supply, particularly since new houses could not be built under Level 3 and Level 4,” he said.

He said that a much more likely cause of today’s house prices than net migration was the Reserve Bank’s decision to lower the Official Cash Rate to its lowest level, along with a $ 100 quantitative easing program. billion.